TMI Blog2014 (11) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... made in respect of the transactions with the clients of the assesse - the revenues earned by the assessee are to be taken at actual figures and no adjustment is permissible in respect of the same - the order of CIT(A) is upheld. Validity of Receipts – Reimbursement of expenses – Held that:- Following the decision in Linklaters LLP Versus ITO (Int’l Taxation) [2010 (7) TMI 535 - ITAT, MUMBAI] - The reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mark up, there is reasonable control mechanism in place to ensure that these claims are not inflated, and the assessee has furnished sufficient evidence to demonstrate the incurring of expenses - There is no reason to make any addition to income in respect of these reimbursements of expenses - the AO is directed to delete the disallowance of expenses as sustained by the CIT(A) and hold that no part of reimbursements of expenses received by the assesse is to be treated as income of the assessee. Assessment of Professional receipts – Held that:- Following the decision in Linklaters LLP Versus ITO (Int’l Taxation) [2010 (7) TMI 535 - ITAT, MUMBAI] - o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in India. However, while doing so, the assessee had computed the revenues by adopting fee rates estimated on the basis of amount that could have been paid to corresponding professionals working in India for availing similar kind of services. Thus, alternatively, the assessee seems to have contended that the profit declared in the above said profit and loss account is chargeable to tax in India. 3. The assessing officer noticed that the total stay of its partners and staffs exceeded 90 days in India during the financial year 1.4.1996 to 31.3.1997. Hence, the AO held that the assessee is having Permanent Establishment in India. In the immediately preceding year, the AO had rejected the alternative contention of the assessee, i.e., the claim to assess the profit computed in the profit and loss account relating to Indian operations. Hence, in this year also, the AO rejected the said claim. Accordingly, the AO proceeded to assess the entire amount received from Indian clients, which is detailed as under in the assessment order:- Professional fee in UK Pounds 2,844,868.31 Reimbursement of expenses:- In UK ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered agreement with this analysis in the UN Model Convention Commentary. We are thus of the considered view that, in a situation like the one that we are in seisin of, i.e., in which specific provisions for professional services or independent personal services or included services exist under article 15, when services are rendered by the enterprise, article 5(2)(k) will come into play, and when services are rendered by an individual, article 15 will find application. Therefore, while we agree with the learned counsel that article 15 will not be applicable on the facts of the present case, this finding does not really come to the rescue of the assessee since, as we have already held, the assessee did have a PE in India under article 5(2)(k) of the India-UK tax treaty, and, accordingly, profits attributable to the PE are taxable under article 7 of the India-UK tax treaty. 107. In view of the above discussions, we are unable to uphold the plea so strenuously argued by the learned counsel for the assessee, and we hold that the authorities below have rightly invoked the provisions of article 5(2)(k). We approve the same, and decline to interfere in the matter . We notice that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted the claim of the assessee that the said receipts relate to the expenses actually incurred and hence the said of expenses are eligible for deduction. However, the Ld CIT(A) noticed that the assessee was not able to produce all supporting in respect of the expenditure incurred and accordingly opined that some disallowance is called for. In the preceding years, the Ld CIT(A) had disallowed 15% of the claim. Accordingly, the Ld CIT(A) disallowed 25% of the expenses (termed as disbursement claim) proportionate to the fee relating to services rendered in India as compared to the total fees. 9. Both the parties admitted that this issue is decided in favour of the assessee and against the revenue by the Tribunal in AY 1995-96 [(2010) 40 SOT 51 (Mum)]. The discussions relating to this issue finds place in paragraphs 131-133 of the order passed by the Tribunal has held as under (para 133, pg.40):- 133. Having heard the rival submissions and having perused the material on record, we are inclined to uphold the grievance of the assessee. The reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 11. The Ground number 9 relates to the difference in the amounts relating to reimbursement of expenses assessed by the assessing officer. The Ld A.R submitted that consideration of this issue would arise only if the issue relating to the assessment of reimbursement of expenses is decided against the assessee. In the earlier paragraphs, we have decided the issue relating to the assessment of reimbursement of expenses in favour of the assessee. Hence, there arises no necessity to adjudicate this issue. 12. We shall now take up the appeal filed by the revenue. The grounds numbered as 1 4 relate to the assessment of Professional receipts. The Ld CIT(A) had held that, only that portion of the income relating to the services performed in India is assessable. Both the parties admitted that the Tribunal has considered identical issue in AY 1995-96 and has held that the entire profits directly or indirectly attributable to the Permanent Establishment is assessable and accordingly upheld the order of the assessing officer. Consistent with the view taken by the Tribunal in AY 1995-96, we reverse the order of Ld CIT(A) on this issue and restore that of the assessing officer. 13. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -UK DTAA to the assessee, as the assessee is a partnership firm in UK where it is not taxed. The facts relating to this issue is set out in brief. As per the Indo-UK treaty, the benefits of treaty would apply to persons who are residents of one or both of the Contracting States. Under the tax provisions of UK, a partnership firm is a fiscally transparent entity and it is not taxable on its own right, but tax is computed by taking the tax payable by the partners. In this back drop, it is being contended by the revenue that the assessee, not being a taxable entity, cannot be considered as a resident of contracting state and hence it is not entitled for DTAA benefits. 18. We notice that this issue was also addressed by the Tribunal in assessment year 1995-96 and the relevant discussions find place in paragraphs 21 to 79 of the order. The co-ordinate bench of Tribunal, in paragraph 79 of its order, has held that the assessee is eligible for the benefits of India-UK tax treaty, as long as entire profits of the partnership firm are taxed in UK- whether in the hands of the partnership firm though the taxable income is determined in relation to the personal characteristics of the part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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